Aside from the cost of manufacturing, marketing, and shipping, sellers should take into account Amazon’s various fees when setting product prices.
Two of the most common are the FBA fees and referral fees. So what are these and how do you reduce them?
FBA fees are paid by those who avail of Amazon FBA for storing inventory and fulfilling orders. FBA fees are quite tricky to determine especially if you’re not aware of how Amazon computes them.
To solve this problem, you should use an FBA fees calculator and take note of the following.
First, there’s a difference between the actual weight and shipping weight of your products. Amazon recently updated their FBA fulfillment fees, and you can check them out to know how much you will be paying.
Second, Amazon automatically adds to the weight of your product during computation, depending on whether it’s standard sized or oversized.
For standard, they add 0.25 lbs, and 1 lb for oversized items. After that, they round up the weight to the nearest pound, so if you’re not careful, what you thought was a standard-sized item might be categorized as oversized, necessitating you to pay more for FBA fees.
A good rule of thumb here is to not use Amazon FBA for products that don’t earn you that much profit or are too bulky for their prices. Remember that Amazon charges you for the space your inventory occupies, not by its value.
Another hack you can use is to always make sure you’re checking your listings regularly to avoid falling victim to stranded inventory.
Having stranded inventory is one of the most wasteful mistakes of a seller. You’re basically paying Amazon to store your products without a way for them to be sold on the platform.
It might also be a good idea to sell products in bundles. In this way, instead of paying for 100 units worth of FBA fees, you’ll be paying for fewer.
A bundle is considered as one unit, so you’ll save a lot of money on fees when you do this.
Referral fees, on the other hand, are fees you pay Amazon for allowing you to market and sell your products on their platform.
This varies depending on the category of your product.
For example, electronics have low referral fees (as low as 8%) while the referral fee for jewelry is at 20%. So when picking a niche and products, it’s good to take this into consideration.
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